U.S. Base Oil Price Report


Activity was fairly quiet in the U.S. base oil arena this past week, largely due to the lack of spot material alongside several industry conferences which took some players away from the marketplace.

Producers appear to be contemplating how to cope with the extremely tight supply/demand conditions while assessing deflated margins going forward. Buyers, meanwhile, are searching for additional volumes from direct suppliers as well as other sources.

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Adding to the already tight supply situation, Petro-Canada said its facility in Mississauga, Ontario, experienced an operational blip in its catalytic dewaxingunit. This has resulted in reduced output of certain grades, involving Group II, II+ and III. The plant is presently running at reduced rates and the company said it is not yet clear when the problem will be resolved. Michael Southern, an official spokesman for the Canadian producer, said that Petro-Canada is looking at all optionsto ensure that customer orders will be satisfied.

The Motiva sales allocation outlined in last weeks Lube Report remains in effect. In addition to that plan, other suppliers continue to keep a close watch on their sales due to severely low inventories amid healthy buyers appetites.

Customers agree that they are receiving much of their contractual needs, but continue to have trouble sourcing extra volumes. They commented that even though much of their regular requirements are being shipped on time, some orders are being delayed by up to two weeks. These late deliveries are varied and depend on the producer and the grades involved, according to suppliers.

Sources in the downstream markets said that during the past week, a number of majors and independents announced finished lubricant price hikes of circa 9 to 10 percent, or about 65 to 75 cents per gallon. (See story in this issue of Lube Report.) These higher prices have already been implemented in some cases, and most will be in place by mid-April.

Looking upstream, instability in North Africa and the Middle East has helped boost crude oil futures by about 14 percent this year, analysts say. Political tensions that were earlier seen in Tunisia and Egypt have since spread to Libya, Yemen, Bahrain and Syria. This conflicted region has a great influence on global oil prices, energy experts acknowledge.

Economists continue to gauge this volatile situation and how it could affect oil production. Libya, which usually produces enough oil to meet nearly 2 percent of world demand, has virtually come to a standstill lately as rebels battle pro-Gaddafi forces. The addition of international forces, including the United States, could mean that the country will be embroiled in a protracted conflict that will keep Libyan oil fields offline much longer than previously expected, energy experts said.

The stressful situation in Japan also helped crude prices rebound this week. It was understood that some refineries in the affected region are producing, but three are shut down since being interrupted by the horrific earthquake earlier this month.

Analysts said that oil futures trade is very thin this week, and agreed that most any global political issue can easily sway prices in either direction. They added that Tuesday was the last day for April futures, which likely helped spike prices.

At the close of the Tuesday, March 22, NYMEX session, light sweet crude futures ended the day at $104.00 per barrel, a sizeable gain of $6.82/bbl compared to the March 15 settlement at $97.18.

Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.

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